Why HR and finance need each other.

While scrolling through Reddit threads on corporate life, I noticed how often HR gets portrayed as “the other.” While partly grounded in outdated stereotypes, this perception highlights a fundamental issue: HR remains isolated from finance and core business functions.

If we truly want to bridge this divide, we must leave our HR island and learn the language of finance and business. This means diving into the concepts of profit and loss, balance sheets, and strategic financial relations to reshape how we view and manage human capital.

Empathy has always been HR’s superpower, but it’s time to extend that empathy to seeing the workforce through a financial and business lens.

For example, finance views the workforce as “human capital,” and while HR has mirrored this in “human resources,” we often still focus on people and culture. Despite the terminology overlap, the underlying disconnect remains. HR focuses on understanding people’s needs, while finance focuses on cost and value creation, viewing workforce members as units on a ledger rather than individuals. To engage in strategic conversations around efficiency and value, HR must fully embrace this financial lens, seeing our workforce as valued individuals and contributors to company strategy.

Connecting the dots.

At a recent talk at Gartner ReimagineHR, the urgency of bridging the HR-finance gap was palpable. The packed room was a clear indicator that this is a pressing topic, especially as companies make strategic decisions around ‘cost reductions here, to reinvest in growth there.’ Attendees were eager to address this practical and conceptual alignment.

A crucial part of bridging this gap is aligning HR and finance on terminology and metrics. For instance, who is in scope: permanent employees or contingent workers? And how do we define cost? Are we just looking at salaries, or are we looking at fully loaded labor costs? Do we use FTE or headcount, and how do we manage factors like “open seats” or fluctuating foreign exchange rates?

These varying lenses can create confusion and siloed views. Clarifying them is essential for both sides to align on the financial impact of workforce strategy and ensure that HR actively contributes to business growth.

Once we agree on definitions, HR can contribute a new level of visibility into workforce costs by showing expenditure shifts across ledgers, ideally with visual tools like waterfall charts.

An example from Crunchr shows how labor costs shift across functional areas due to hiring, transitions between departments, salary increases, or overtime. This visual breakdown helps finance leaders, including CFOs, see precisely where and why labor costs rise or fall, aligning them with business strategy and enhancing budget planning. By linking attributes like cost or profit centers, job families, locations, and business units to individuals, we can aggregate insights as needed and dive deeper to validate and verify these changes.

Measuring the people factors that drive the business forward.

People analytics can also change the focus from merely viewing people as costs to seeing them as revenue generators. For example, driver analysis can help identify which employee attributes correlate with higher sales attainment or which roles significantly influence customer experience.

Digging into the data in Crunchr, we can analyze the people drivers linked to business outcomes. By understanding these insights, HR can contribute to revenue growth and improved customer experience, emphasizing the workforce’s positive impact on business outcomes.

Combining revenue and cost brings us to the heart of strategic finance: are our investments in workforce costs aligned with our earnings potential?

Assessing human capital: a framework for HR and Finance.

Finally, a more ambitious (and philosophical) idea emerges: can we value human capital on the balance sheet? If our people are a company’s greatest asset, why don’t we quantify their value like other capital assets?

Imagine measuring talent retention as a “stability index,” assigning value to skills gained through training, or using engagement increases as a measure of productivity.

Though challenging, creating a framework for assessing human capital could clarify the ROI of investments in retention, engagement, and development, transforming how HR and finance view the workforce. If we could establish this financial valuation, we’d quantify HR’s contributions and the ROI of these investments—a pursuit many would see as the holy grail in business.

This ambition strikes a personal note for me, as it brings me back to where I started my career as a consulting actuary.

Actuaries spend six years mastering mathematical statistics to put a value on uncertain events. If we can price a car insurance policy without knowing if or when damages might occur, how severe they’ll be, or how the invested premiums will perform in the market, then I am confident we can work with finance and HR to develop a robust formula for valuing human capital. Like any actuarial calculation, it requires an interdisciplinary approach—where HR, finance, and the business all contribute to ensure we capture the right metrics for our workforce.

To make this vision actionable, we need a unified starting point, a way to calculate human capital for the balance sheet. We could spend countless hours debating this. But instead, let’s start with a transparent, open-source initiative that establishes simple, straightforward formulas. This would help us create a shared foundation for HR and finance to advance organizational value.

By taking an open, transparent approach, we push ourselves toward action—not endless debate. Bringing HR and finance together will both improve how our teams work together AND help foster a deeper understanding of the true value of our workforce. One that recognizes both the human contributions and the financial impact they have on our organization.

By speaking a shared language and aligning on metrics, we empower HR to showcase its strategic impact in concrete financial terms. This partnership has the potential to redefine how we see human capital—not as an abstract expense but as a measurable asset that drives organizational growth.

Together, HR and finance can unlock a future where employees are seen for what they truly are: a company’s most significant (and measurable) asset.